Earnings Call: Q2 2016

Jul 22, 2016

Welcome to the Interim Report, 1st January to 30th June 2016. Throughout the call, all participants will be in a listen only mode. And afterwards, there will be a question and answer session. Today, I'm pleased to present Lorenzo Trabao, CEO. Please begin your meeting. Thank you. Good morning to you all and welcome to our second quarter report. You have, as always, Joakim Anderson, our Chief Financial Officer and Torren Lissen, our Director of Communication, together with me to present our Q2 results. Q2 was a solid quarter of growth and investments. We were particularly pleased with the performance of Zalando, which according to preliminary numbers delivered a 25% sales growth and an 8.5% margin. We're also pleased that we were able to complete the GFG investment with Kinnevik acquiring a 35% leadership stake in the company with a scaled back DKK 161,000,000 investment at a very attractive valuation. And finally, we return over DKK 7,000,000,000 in dividend, which is equal to 12% of yesterday's market capitalization. We begin the second half of twenty sixteen well positioned to deliver on our long term shareholder value creation promise. We have solid market position. Our brands are performing well. We have well invested companies and highly motivated management teams. With that, let me turn over to Page 2 to give you a bit of a highlight of the quarter just ended. As I stated earlier, our operating company's performance was solid. In e commerce, we had growth above peers and significantly improved communication, we continue to execute our transition from voice to data with Millicom and Tele2 delivering good performance on that front. On the entertainment side, we're capturing OTT growth through content and partnerships repositioning. And finally, in Financial Services, we're off to a very good start with Betterment performing in an uncertain economic and capital market environment. On the investment management side, we invested over DKK 500 1,000,000 in the 2nd quarter all into existing companies, very consistent with our strategy to grow and support our presence in our existing businesses. We invested €50,000,000 in the second tranche of prefunding for the entire €161,000,000 into Global Fashion Group. And we continue to see strong interest from other shareholders in supporting this company into the future. As previously announced, we sold 3.8% stake in Lazada to Alibaba for $57,000,000 and received the cash in April. And finally, we're delighted to support Tele2's rights issue in conjunction with the acquisition of TDC Sweden, their B2B business, which is expected to close in the Q4 of this year. And that should entail a $900,000,000 spec investment by Kinnevik. So we end the quarter with about $65,000,000,000 in NAV, which is down 1.7% on the quarter against a market index in Sweden and Germany of down 6%. If you looked at yesterday's share price, our NAV will be up to nearly SEK 70,000,000,000. The net cash position following the SEK 7,100,000,000 dividend remains positive at SEK 400,000,000, and we have just signed a new 5 year credit facility that gives us ample working capital facility in addition to our existing credit lines and bond financing. If we start with the operating company's performance in a little bit more detail and turn to Page 4, we have summarized here the momentum that we see in our 6 largest public companies. As stated earlier, we had excellent performance of Zolando, which reiterated its full year guidance of revenue growth at the upper end of the range, so closer to 25%, and increases the full year adjusted EBIT margin guidance to 4x to 5.5x. This is what I called delivering on expectations and actually delivering beyond expectations. 2nd, as reported yesterday, Millicom and Tele2 are both experiencing a voice to data impact in their core operations, yet are able by focusing on growth in data and cable in the case of Millicon and delivering excellent propositions to their customers in Sweden to continue growing their core service revenues. In the case of Millicom, we were also pleased to see a healthy improvement in both the level of profitability and cash flow generation. The case of Tele2, EBITDA declined as a result of investments in Holland and Sweden. We believe these are important steps in securing the long term strength of the business. Finally, as previously stated, we're delighted to see that Tele2 over to Rocket. As you know, the company is very much in its investment phase, but it's making solid progress in driving what they call the P2P, the path to profitability for every one of their major investments. And of course, we see this within GFG, which is the company we co owned, but we see that also in a number of other businesses as announced in their Q1 results. Finally, we noted the great interest that their African Internet group recently renamed Jumia has received from a number of international investors including Orange, AXA, Goldman Sachs and CDC. If we turn over to MTG, we're pleased with the solid performance of the company as they continue to develop new products and new distribution channels to strengthen their presence in the OTT sector. Finally, we are also pleased to see that Cliro is beginning to deliver improved profitability in their core businesses as well as engaging in a refocusing of their business for the sale of Treti to wipe away. Turning over to Page 5, this chart illustrates the great progress made by Zalando since IPO. The numbers speak by themselves and we're very impressed with what the management team has delivered, not just on this quarter, but in every single quarter they've been executing on since the time of the IPO. On the right hand side, you see 4 key initiatives that the company is delivering upon: driving customer satisfaction, engaging more deeply with the brand, building up their logistics footprint and investing in scaling technology. This is at the heart of Zalando's strength and that supports their constant innovation and spirit of reinvention, which is really the trademark of Zalando and has been since their inception. But as you know, growth and organic growth on a standalone basis is only part of the investment proposition that we believe in. And there are 2 other very important levers that our companies work on. The first one is building great partnerships, and this is something that we at Kinnevik have been believing in for decades and believe that all our major investee companies need to develop, the power of partnerships and the power of consolidation. Starting on Page 6 with partnerships. During the quarter, there were 4 promising partnerships announced, Zalando and Adidas, to create a greater access for customers on the entire inventory base of a particular company. Millicom and Netflix, clear partnership delivering greater content and access to exciting entertainment for our customers and obviously for Netflix accessing a much larger and broad population through our digital platforms. Tele2 in IoT with Cispere and IBM to continue building this exciting future business and finally, MTG securing access to distribution for the partnership with Telenor. And this is all about building businesses together. But at the same time, as we turn to Page 7, we recognize that in certain cases, consolidation is the answer to the value creation quest. And in this case, we see 2 very interesting transactions at the opposite extreme of the spectrum. In the case of TDC Sweden, Tele2 is the cash buyer to develop their strategically important B2B business, creating a stronger and deeper presence in the Swedish market. A relatively good valuation and a solid plan to extract value through synergies and integration. At the other end of the spectrum, Cliro, which is now engaged in 6 businesses, recognizes that it's probably better off focusing on 5 businesses and properly capitalizing their investments in Clear Financial Services. And with a cleverly structured transaction, a sale for cash of 1 of their smaller businesses and the establishment of a great partnership with White Away Group, which allows to continue driving the QFS business across the entire portfolio of Wite Away business. 2 good examples of what it means to take a business forward, not just through organic growth, but also through cleverly structured M and A transactions. If we now turn over to our private companies on Page 8, we're presenting here the key financials and the key performance indicators on 6 of our most promising digital companies. Starting with GFG, this is clearly a company moving in the right direction. And we're particularly pleased to see that on their path to profitability, they're continuing to deliver healthy growth rates as well as improved performance. If we look at Quikr and Betterment, 2 of our more recent investments, we're very pleased with the outstanding customer traction that each of the companies are delivering. Clearly, these are young companies and we are a little guarded in presenting their financials. But as you can see on this page and on the following page, the key performance indicators that we track and monitor on a monthly basis are all going in the right direction. Turning to bema and Westwing. Clearly, these well established companies are consolidating their position, having built an outstanding presence across, in the case of BIMA, 15 countries and in the case of West Wing, 7 or 8 core markets. The revenue growth is a little slower than in the past quarters, and this is part of the transition phase that many of our companies face after having expanded internationally and build a solid customer base. They go through a process of consolidation and margin improvement before reengaging on a faster growth path. And finally, Babylon, a very young company in which we invested just a few months ago, which continues to be at the forefront of product innovation in digital health. And we're particularly excited about some of the developments that they're carrying out in the world of artificial intelligence to create clinical triage to really enhance their ability to deliver a very broad offering to consumers in both developed and developing markets. If we turn to Page 9, this slide summarizes the significant improvement Global Fashion Group has delivered in the Q1. The customer statistics are very healthy. Total customer growth of 77%, active customer growth of 51% as well as on the revenue side. And as you can imagine, these being emerging market companies, some of the numbers are clearly impacted by the local currency. On the right hand side, you see the significant improvement that has been made on the profitability path, and we believe that this company will continue to be on this path for several quarters to come. Although, as we know and as we've stated before, emerging market businesses do take a couple of extra years to get to the right level of profitability versus developing market peers. And as such, it will take a few more years until the company becomes on par with the Zalanda profitability. Finally, we are continuing to drive a number of key initiatives with respect to each and every one of the GFG businesses in establishing stronger partnerships with brand owners, developing the marketplace as a way to derisk the inventory based company and continuing to invest in a very valuable logistics and distribution infrastructure across many of these emerging markets. If we now turn to Quikr, we're particularly pleased with the development of the company in its focus on verticalizing and entering much deeper engagement with our customers across these 5 core sectors: homes, jobs, services, cars and goods. And as you can see, in every one of these sectors, we are continuing to develop a strong market position and driving customer engagement, which allow us to build a very strong path to monetization and eventually to profitability. Turning over to Page 11. These are the key statistics that we are currently focused on as it relates to Betterment, our most recent investment. As you can see, both on the customer side, 100% growth or in the assets under management, 110% growth, the company is continuing to deliver excellent growth. Once again, this is a very long term investment in building a solid presence in the digital wealth management and eventually developing monetization and profitability. But we're very excited both in the development of the direct business as well as the betterment for business, which is the 401 business line, which now serves 175 plan sponsors as well as the registered investment adviser business, which now serves over 250 RIAs and their clients. Now let's turn over to our investment management activities. If you turn to Page 13, you will see a summary of our transactions for the quarter. As you will have appreciated following the operating company's review, we have a great portfolio of assets with great potential. As such, during the quarter, what we focused on was, a, releasing capital from Lazada to refocus our efforts on a fewer set of companies and dedicated our efforts to building what we own. We made 2 meaningful investments in GFG, as we previously discussed, and in Westbank, and we are committing to fund and support Tele2 key strategic development in Sweden. If we turn over to Page 14, we're summarizing here in a little bit more detail the GFG investments because, of course, it has taken a period of time to execute it, and we want to make sure you have full visibility on it. As previously stated, we're investing a total of €161,000,000 of a €330,000,000 round, so nearly 50%, to increase our stake to 35%. Following the underwriting that we announced in our prior quarter, great interest was stimulated in GFG, which meant that we upsized the investment from $300,000,000 to $330,000,000 which was the cap we had agreed prior to launch and generic got scaled back. And together with other investors, we also decided to convert the shareholder loan and convertible investment we had made last year such that in total, we are today investing EUR 161,000,000 from the existing round and EUR 15,900,000 from the prior round at a very attractive €700,000,000 preman evaluation. Through this transaction, GFG will be fully funded in each and every one of their existing businesses and can now be comfortable in delivering on its future plan for growth and profitability. Completion of this transaction is expected to occur in the Q3 when all regulatory approvals have been received. With that, I turn it over to Joachim, our Chief Financial Officer, who will give you some background to the environment in which we have operated in as well as the valuation of our private assets. Joachim, over to you. Thank you, Lorenzo. So starting with Page 16, you can see on the left hand side development of the larger equity indexes. And for Kinnevik of particular interest, as Lorenzo mentioned in the beginning, both the DAX and the Swedish index, OMAX30, were down by 6% after having recovered some of the sharp drop that was seen in connection with the Brexit referendum. If we turn right and look at the currency development, we find that the Swedish krona weakened across the currencies we pay certain attention to given our company's geographical presence. On the next slide, we have included a couple of graphs showing the performance of the quarter for the communication sector. And while both Millicom in blue line and Tele2 in the green line outperformed their respective market pair, It was a quarter with generally contracting valuation multiples, as shown by the columns with EVEBITDA sector multiples on the right hand side. Moving on to Slide 18 and the e commerce companies. We see a mid picture with a 6% positive share price development for the marketplace peers, but the negative 10% for the peer group within fashion e commerce, as highlighted by the lines in dark blue and dark green, respectively. As for the communications valuation multiples, we saw general multiple contraction also for the e commerce air groups, with the most significant development for the home living category, where we saw a drop from 1.4x to 1.1x in the EV sales multiple. If we then move on and go to Slide 20, we will look at what these trends meant for Kinnevik during the Q2. On this slide, we give the detailed information about valuation of our largest unlisted companies. On a consolidated basis, we see on the bottom line that the fair value of these assets were marginally down during the quarter by SEK 253,000,000 and ending with a total value of SEK 10,000,000,000. On the top row, you can see our 2nd quarter investment into Global Fashion Group that Lorenzo talked about earlier, namely the EUR 15,000,000 in shareholder loans as well as the small increase in value, taking the total fair value of our 20% stake to SEK 3,600,000,000, including shares and loans. On the second row, we are showing a fairly high write down of shares in Home24, which is driven by the continued multiple contraction for the home and living peer group mentioned earlier and an unproportionately high impact on our fair value due to the liquidation preference structure that's in place and the fact that Unitiq has lower ranked shares. If we quickly turn those details into a bar chart on Page 21, it is even more visible to us that the change in fair value in the second quarter was very small, going from a total portfolio value of SEK 10,200,000,000 at the beginning of the quarter to a value of SEK 10.0 at the end, including both the investment in DSG and the partial divestment of the Lazada share shown in the graph to the right. On the next slide, Slide 22, which is a business slide with many numbers, we would like to highlight the overall NAV development over the quarter, where the starting SEK 72,700,000,000 or SEK262 per share ended at SEK 235 per share, which corresponds to a decrease by 2 percent pro form a for the total capital distribution of SEK 25.75 per share. Based mainly on the very strong performance by Zalando, this week, the NAV has increased from the SEK 2.35 per share by 8% in July to SEK 252 as of yesterday. The 3 most noteworthy contributors to the NAV development of the quarter was, firstly, the decline in e commerce multiples and the negative development of Zalando, which, again, has been more than recovered in July. Secondly is the very strong performance by Millicom with a 16% increase. And thirdly, the capital distribution to the shareholders by total amount of SEK 7,100,000,000. The final slide in this section, Slide 23, is, as usual, the summary of the investment activities and the overview of our financial position. During the Q2, we made net investments of SEK 79,000,000, including second loan to GSD and the sale of Lazada. The accumulated net investment for the first half of the year amounted to SEK 1,200,000,000. If you turn right, we started the quarter with a net cash of SEK 5,800,000,000. And taking out the net investments, the OpEx and the net cash of distribution, we ended the quarter in a net cash position of SEK 354,000,000. We have added a table this quarter showing the total committed but unpaid investments that totals SEK 1,500,000,000. All in all, and based on the information on the slide, Kinnevik would end the year in a net debt position, but still well within the financial targets of having low or no leverage. The investment guidance for the year is maintained at the range of SEK 2,000,000,000 to SEK 3,000,000,000 for the full year, and we expect to be in the lower end of that range, excluding our participation in the announced rights issued by the 2. With that, I would like to hand it back to you, Lorenzo, for your concluding remarks. Thank you, Joakim. Turning over to Page 25. As we stated at the beginning of the year, we are highly focused on delivering on 3 priorities: driving the growth, innovation, profitability and where appropriate partnerships and consolidation with our operating company and executing on our GRC and CR promises. And we're pleased with the progress we have made on those accounts. 2nd, we committed to investing into our priority companies and building a tighter portfolio of great companies. And once again, we feel this quarter is testament to the developments that we've committed to executing during the course of the year. And lastly, we're pleased with the position of Chinarix. We've got a strong team, a strong balance sheet and through the capital distribution we have just executed, we're continuing to deliver value to our shareholders. And so if you turn to Page 26 and our last page, as you can see, whether you look at it over the last 15 years, a period during which we delivered 110% total shareholder return over 2x the relative index performance or you just look at the last few months when we've delivered $7,100,000,000 in cash in a quarter to our shareholders, we are highly committed to delivering our priorities and turning them into shareholder value. With that, I'd like to open it up to questions from all of you. Thank you. Thank you. Ladies and gentlemen, this begins our question and answer session. The first question is from Derek Ladiberteu, ABG. Yes, good morning and thank you for taking my questions. My first question is on your path to the $2,000,000,000 to $3,000,000,000 you're guiding for in net investments for the year. As you've already reached roughly SEK 3,000,000,000 or SEK 2,000,000,000 excluding the rights issue. Should we expect little or much activity for the remainder of the year for you to stay at trough, it is the level you're at now. Thank you. As I stated in my remarks, we believe that we have a great set of private companies that we need to build over the coming years. And as a result, we are continuously evaluating an opportunity to accelerate the growth of 1 or more of them by injecting more capital into them and also whether some of the earlier investors are potentially interested in relinquishing their position at an attractive valuation. And so I would say that 70% to 80% of our investment focus right now is in determining whether we have opportunities to capital to build our position in our existing companies. Of course, at the same time, the remaining 20%, 30% is spent in evaluating the market opportunities that exist in priority sectors. So by and large, we expect to invest further capital in our existing business for the balance of the year or at least for the next quarter. And that means that we are confident that we will stay well within our guided net investment range. Okay. That's very clear. Then I also wonder on the Home 24 downgrade, basically written down the value to almost nothing compared to what it was before. I understand the liquidation preference, but it's still pretty significant at 80% downgrade. So are there any other holdings in which we may be risking this type of huge write down due to liquidation preference? So in the case of Home24, as you probably know, given you follow us for a few years, we were an early investor in the company and the company has since attracted tremendous interest from other major investors that have contributed capital. And obviously in that process, the company has grown such that the valuation from a latest transaction value has reached very high levels at around 900,000,000 dollars And so it's a combination of the additional capital that has come in and the high valuation means that our earlier investment if calculated on a mark to market basis under IFRS, results in a relatively small fair value. But we remain confident that the company is executing on its plan. And if and when the company becomes profitable and seeks a potential liquidity event, then we will recoup and achieve a good return. But in the meantime, our strict adherence to the IFRS standard means we have to market taking full account of the liquidation preferences. Thank you. My final question is on the GSG financing round. Is this level of $161,000,000 the one you were looking for to reach 35%? Or would you have preferred to take an even bigger stake if you would have been able to? Thank you. I think we knew when we underwrote the $200,000,000 out of the $300,000,000 that it was quite likely that we will be scaled back. We were surprised positively surprised by the fact that all or pretty much all of the shareholders that had an opportunity to invest in the company took their round and the ones that didn't participate were people who because of the structure of their fund or their investment targets were not in the business of participating in late stage investments such as this one. And as a result, given that we started from a never believed that we will be able to take 66% of the round. So we always knew we would end up in and around 50% that we've ended up right where we thought we would. I think from our point of view, as you recall, we did a similar exercise, with Monciniuk took a leadership position in Zalando we ended up at around 36%. So this is very much in line with what we were aiming for. Thank you. That's very clear. Thank you. The next question is from Elias Porsche, Nordea. Good morning. Elias Porsche here. The GFG round was upsized by €30,000,000 Could you tell us something about what this money will be used for? Thank you. So the money will be used to create what we call technically a buffer, which means that as opposed to be just fully funded, we have an extra amount of capital, which we can deploy tactically in 1 or more regions to drive the growth at an even higher rate. As you have seen and you will have heard from the comments that have been made around GFG, right now we are highly focused on what we call the period of consolidation, which people summarize sometimes as the P2P, the path to profitability, which means reviewing every one of the operations and understanding how we're going to get to not just having attractive unit economics in the upper part of the balance sheet, but delivering bottom line, right. So that is the exercise that is going on today because when you have a great business that is delivering anywhere between 40%, 45% plus gross margin, you just need to have the right size cost structure below. And in order to get there, you can drive revenues, but at some point, you also have to reengineer the whole infrastructure and SG and A. And that's what we're doing right now. Once that is done and you have excellent unit economics as well as the lean cost structure, then comes the time when you need to reinvest into the business. And so having that extra €30,000,000 gives us the confidence to be able to do so across many of the targeted regions. Thank you. Coming back to Global Fashion Group, there has been so many media reports about Jabong recently and specifically about the potential exit, but also about some potential mismanagement by the previous CEO. Could you comment anything on Slide 9 of our presentation and you think about what we have been discussing throughout our presentations over the last few years, and obviously, you think about the comments we made on Slide 6 and 7 around partnerships and consolidation, it is pretty clear that if the entire GFG has a negative EBITDA margin of 23% and Namshi was at minus 2% and Jabong was at minus 37%, there's clearly something to be done to improve the performance of Jabon, right? And that is, as you can imagine, something that we are highly focused on. And to that extent, we have, as you would expect and we do for many businesses, engaged with respect to driving organic growth and improved profitability on a standalone basis as well as assessing the opportunities for partnerships and consolidation. And that's probably why in India, which is a market which loves gossip around technology companies, there's been a lot of speculation. But as of today, nothing has been decided and we are just evaluating options as we do for all the businesses where we seek to improve the performance either organically standalone or in partnerships or through consolidation. So this should be no surprise to you. In fact, I would say, as I think we discussed during our Q1 presentation, I think you'd be disappointed given the minus 37% if we were not highly focused on exploring all options to improve the performance. So that's as it relates to the comment around speculation. As it relates to the rest of the other comments that have come out in the Indian gossip market, it is a fact that allegations were made last year regarding what I would describe as improper business conduct by former employees of Gevonk. As you know, Kinnevik has a full commitment to our GRC and CR policies. And as such, we made sure that the Board of GRG took immediate action to evaluate the situation and we commissioned as it happens in this situation an independent investigation in the allegations that were made. And this is quite customary. In most cases, when something like this happens, it just dies by a natural cause unless it is something material, in which case it is disclosed. And in this particular case, the investigation did not conclude that there were any damages that were caused to Jovong and as such the investigation was closed. Since then, of course, we have taken the allegations and the outcome of the company with the hiring of 6 new people. And of course, we have redoubled our control efforts as it relates to Jovong to ensure that situations ambiguous such as this one never take place again. Very clear. Thank you. Final question, if I may. Betterment just appointed a new Chief Financial Officer. Could this should we see this in a step towards an IPO? Or is that still very far off? I saw the we're the 1st company in the space to reach €5,000,000,000 use in assets under management as well? So I mean, it's obviously going very rapidly as you've shown on these slides. Thank you. So Betterment is a very young company and they have a huge market opportunity. And so we are highly supportive of the management team delivering on its plans under private ownership, which is the one that we have. And as you know, we never put any type of pressure on companies to pursue IPOs because we are very content with companies remaining private possibly forever. And so as far as I'm concerned, we're delighted with the current situation and the appointment of the new Chief Financial Officer is nothing else than a strengthening of the management team, which again we are very supportive of. Thank you. Thank you. The next question is from Magnus Raman, SHB. SHP. Firstly, can you help us understand the new Indian rules for foreign direct investments in e commerce and then how they affect Jibong and are you planning to transform Jibong's business into a marketplace model? That's the first one. So as you know, retailing in India is a subject of extreme importance for the local economy and a market that has very strict regulations. And so when Jabong entered the market, it established a fully compliant approach whereby they operated as a B2B provider of services with the B2C activities being carried out by a fully independent third party owned company. And that's been been modus operandi, which, as I said, fully compliant with FDI regulations, which has been consistently executed. More recently, the opportunity has come through changes in regulations and business model to adapt and adjust the operating structure such that we no longer operate in a pure B2B environment, but we move to what is described as the modus operandi of a marketplace. And the marketplace, as you know, is a technology platform that allows merchants to sell their goods to 3rd parties. And so we have successfully migrated the business to another FDI fully compliant model, which is the model of a marketplace where Jabong essentially enabled 3rd party merchants, multiple, literally 100 of them to sell on the platform. And as such, that migration took place last week. And obviously, like everything, there are a little bit of teasing problems when you shift the fundamental business model. But we are confident that those teasing problems will be fixed over the next few days and the company will be fully affected under the new regime. And is there a rule stating that no party in this marketplace can be larger than onefour of total volumes? And how would you call that? And also, do you believe that a potential divestiture of the business will be hindered by these foreign direct investment rules? So if as there are rules that ensure that the marketplace is a real marketplace and there isn't a single merchant that's possibly associated with the platform to be the lead or controlling the majority of the flow, then we are fully compliant with those approaches and methodologies. So there's nothing unique or unusual about our structure. And obviously, there will be and there are multiple merchants that are controlling the appropriate amount of volume as any marketplace, which is the merchant will control the amount that is relevant to him based on his performance or her performance. As it relates to the comments I made regarding exploring options, as I said, for all of our businesses, we have an organic growth path, we have a partnership model and we have consolidation model. And consolidation can mean that we buy another company, we double down or we merge or we exit. And so all these shrouded in mystery in the past quarter since it's been shrouded in mystery in the past quarter since it's been removed or placed into others in the unlisted valuation list in your quarterly reports. Can you update us on the progress of VIMDU and the current valuation? Sure. So as you know, we are a DKK 65,000,000,000 company with over 34 investments in our portfolio. And so what we try to do is to produce communication, which is transparent, but also relevant in terms of focusing on the companies that are actually making an impact on Kinetic as opposed to drowning all of our shareholders and investors and research analysts with detailed information on all 35 companies because that would just be a little too much and in many cases irrelevant. In the case of Windu, Windu as you know is a quite small operator in the travel accommodation booking sector, a sector which is increasingly dominated by Airbnb and a few other large players. Travel is not a core category for Chienaik. And as a result, we have not focused on wind communication because of the small size of the company, the fact that it is a sector that will inevitably aggregate towards a few large players and that we are not planning to make further investments into Endo. So there's nothing mysterious about it, just a desire to be focused on matters that are relevant to the future of Genomic as opposed to be covering all 34 companies in detail. Right. And then maybe just a follow-up on that. What is the sort of the value threshold for showing unlisted assets in the list specifically or otherwise just placing them in the others account? Or do you have a different selection criteria than value? Yes. I think what we try to do, first of all, is to be material, I. E, focusing on the companies that are actually of interest to the public, meaning the people who follow us and to provide greater depth on those companies. We don't follow necessarily particular threshold. So for example, today on Page 8, we spend time talking about Babylon just because it is a young investment that is quite exciting in terms of what they're doing. But then on Page 20, we give you further color, as you can see, in terms of fair value down to essentially 90% of the companies which are included in the top nine investments. And then we bundle all the others, which account for about SEK 1,200,000,000 whatever, EUR 130,000,000 and that's probably something like maybe 15 companies or so bundled together. But if there is an interest and you want to follow-up with me and Joakim later on to understand a little bit more of these details, we're happy to do that, of course. Great. I just have a final one on Home24. Can you confirm whether Home24's CEO, Dominik Cipolla, has quit the company? And if so, when you expect the replacement CEO to be appointed? Thank you. So a management transition has taken place at Home24 and new leadership has been established. We are also very pleased that Lotte Land, our new Board member, Chinevig, is continuing as Chairman of the company. And we are very focused right now on the integration of the recently acquired business for the home, which will give us stronger capabilities in the sourcing, in particular, on the private label. So there's a lot going on within Home24. Clearly, this is a younger category than fashion, but it has very attractive gross margin and also a very interesting working capital cycle. Because as you know, if you order a pair of Adidas shoes, you want them in 4 hours. But if you're buying a new bed, you're probably used to waiting a few weeks. And as such, that makes the business model quite interesting. The next question is from Philip Middleton, Merrill Lynch. Good morning. Thanks very much. Just a couple of follow ups, 1 on GFG, 1 on Home24. On GFG, could you talk us through exactly who were the additional shareholders that came in? Were these investors who just re upped or have you had any new investors come into the funding rounds? And on Home 24, I understand come into the funding rounds? And on Home 24, I understand the point about investment preferences, but surely isn't another here, just the enterprise value fell. Therefore, there was a kind of material impact to the liquidation preferences you haven't seen before. In other words, why have we seen this fall this quarter when the liquidation preferences have been in place for well, since they've been in place? Sure. So on the first question of GFG, this was a fully internal round where essentially there was such high demand by existing investors, even small individuals participated. And so there was no other new investor who came into the company. So that's the first point. And then the second is the people who did not participate were typically venture capital funds that were early investors and then as such didn't have the ability to continue investing over multiple rounds as the company became bigger or people who business of this nature and have decided since to move on. And so whilst our internal pro rata might have been around 25%, As you can see, we ended up taking more like 50% of the round. That's on the GRG side. On the Home24 side, I think what you need to look up is on Page if you look at Page 18, you see that the key home and living peer, just a big one, Wayfair went from 1.3 to 1x. And so if you apply a reduction of that nature to the historical sales of Home24, just straight read across, there is clearly an impact that is ascribed to the enterprise value of the business. So that is the first element of the calculation. The second element of the calculation is looking at where is the amount of capital that has been raised and then consumed over the last few quarters that sits ahead of the capital that is invested by Kinnevik a few years ago. And as you know, as you probably know, we have not participated in the last several rounds of Home24. So there's quite a lot of capital that sits ahead of us. And so if the value of the company is X and there is Y of capital sitting ahead of us, if you take X minus Y and the number is small, then by definition, our theoretical IFRS equity accounts get into close diminished to a very small number. But that's just a theoretical number because if you say, give it 2 or 3 years, the company performs and it goes public, then our ownership interest is what becomes relevant. And all of this historical IFRS calculations of liquidation preferences get scrapped. But in the meantime, because we are a very conservative company and one that is highly focused on applying on a consistent basis the valuation methodology and the liquidation preference adjustment, we need to make sure that we report accordingly. Okay. Thank you. Thank you. The next question is from Victor Lindeberg, Carnegie Investment Bank. Looking at the net investment level, that now will take you into a net debt position. And assuming then close to €3,000,000,000 of net investments, you will definitely be leveraged a couple of quarters from now. Can you just elaborate what leverage you feel comfortable within in Kinnevik as a holding company given that you already have quite big net debt in some of your holdings today? So first of all, starting with the end of the question, we feel very comfortable with the level of leverage that each and every one of our companies have or on the flip side, the cash position that many of our companies have, which in the case of Zalando is like EUR 1,000,000,000. So I think the most important thing to start with is to say that our companies are appropriately leveraged, not overly leveraged. And if an extraordinary transaction like Tele2's acquisition of PBC occurs, then the company immediately restores its position by raising equity. So I feel that if you look at the world that we live in, most mobilemobile cable companies are leveraged well beyond where Millicom and Tele2 are. And in fact, the generic prudent approach to balance sheet management is something that we are continuously putting in place as for the boards and the capital structure committees of our companies. And so that applies to the more established businesses like Medicom 32, 20 gs. It applies to the younger companies. And then for example, you look at what we're doing with Cliro, where the divestiture of Treti is clearly strategic but financial as well because the release of capital allows us to fund the buildup of the loan book of QFS. So most important point to make is Kinnevik is a conservative financial investor in terms of applying very disciplined and prudent balance sheet measures in the evaluation of their company. 2nd point is looking at it from a generic point of view, we have a clear policy which states that we have no or little leverage. So with €65,000,000,000 of net assets or actually €70,000,000,000 if you look at it yesterday and 85% of those assets right? This is not a company that has illiquid assets that are loss right? This is not a company that has illiquid assets that are loss making that who knows if and when they could sell them. We could literally create equities in our portfolio overnight. And so we have strong companies and we have a very strong position ourselves. And lastly, we are in the business of capital reallocation. And so even if we might end up having EUR 2,000,000,000, EUR 3,000,000,000 or EUR 4,000,000,000 of leverage at a certain point in time, we will be part of always executing a plan where we will look to take that leverage down back into a cash position over the following 6, 12, 18 months for disposal. And so I think you need to bear in mind that our investment management model is one of creating excellent return through capital reallocation. And at any point in time, we will be either in a cash position or debt position, but always within a very tight span. That's quite clear. And a follow-up on that, actually looking at Zalando with a big cash position now and evidently performing quite nicely as well operationally and financially. What do you think about the leverage in that kind of company a few years down the road? I mean, what is your view here growth, of course, going to continue? And evidently, they can do that without taking too much of the net cash position. So would you say that dividends from Zalando is something we should expect going forward? So the first thing to say is that we want Zalando to be fully capitalized to be a fast growing company that can capture all the opportunities and more, right? So the last thing we want is to Zalando start optimizing their balance sheet too early in their growth phase. Remember, this is a market that is a €350,000,000,000 to €400,000,000,000 fashion and accessories market. And Zalando this year will have less than $4,000,000,000 in sales, right? So we have 1% or not even 1% of the total addressable market. So if you think about it, the opportunity we have over the next 10, 20 years for Zalando to conquer this market is enormous. And in order to do that, you need capital. And yes, of course, we're delighted with the profitability. But conquering that market in a way that is making justice to such a large market might mean having a phase of investment in 1, 3, 5, 10 years, who knows, that could require access to substantial capital. And so given the size of the capital, the growth that is being experienced and the opportunities that we see, we want to make sure that Zalando has ample access to liquidity. And as such, we're happy to take some negative carry implicit with holding a cash position on the balance sheet. That's the first point. The second point is that in the technology space, and as you know, Zalando is a technology platform, the norm is not to pay dividends. This is consistent across most technology companies, particularly in the Anglo Saxon world, but that's happened. And as a result, the business opportunity remains fully there in terms of delivering attractive returns to capital appreciation. There is, when companies mature, the opportunity to buy back small amounts of stock, in particular to retire stock option plans. And I'm sure that over the next 5 years, the management will look at it. And if so, we will support that. But remember that the key for us is to have the right balance sheet to support the opportunity, and the opportunity for Zalando is huge. Yes. I agree with you on much of that. Just that I'm thinking here about the strategies because you have, I mean, a longer term strategy that is very similar for GFG, I think, but you are actually injecting equity as we as time goes by rather than just do a big capital raising now. And I mean, in light of this, Zalando is always also listed, of course, so that makes things a bit more difficult. And I'm just thinking about the cost of capital perhaps. And you also mentioned that when you see opportunities, you inject capital such as Intellitude now, for instance. But I do understand your reasoning also. Thank you. Thank you. Thank you. We have a follow-up question from Magnus Herman, SHP. Yes. I just had that question answered very, very nicely around Zalando and Financial Dividends. Thank you. Thank you. We currently have no further questions. Great. Well, thank you very much for your time. I recognize that many of you are hopefully looking forward for some time off. And so we very much appreciate you taking the time to go through our results. In closing, Shilevich is well positioned to begin the second half of twenty 16 and deliver on our shareholder value creation promise. We do not control the markets. We do not control the valuation, but we do have a strong influence on many elements that are driving our company. The investments they make in building their brands and attracting customers, the capital they have available, an open mind towards partnerships and consolidation and ensuring that each and every one of our teams is highly motivated. And on each and every one of these factors, we are highly focused on executing. As we speak, we have members of the Shinnevik teams sitting in 3 or 4 continents working very closely with the management team to deliver on the promise that we have for you. And we look forward to updating you again in 3 months with what we believe will be an additional set of positive progress across many of our KPIs. So with that, I wish you a good break and look forward to catching up soon. Bye bye. Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may now disconnect.